Adding diversity and innovation to the mutual fund landscape in India, Bajaj Finserv Asset Management Ltd has launched its Bajaj Finserv Multi Asset Allocation Fund, the first fund in this category in India to adopt a dividend-yield investing strategy.
As the New Fund Offer (NFO) period draws to a close on May 27th, 2024, let’s look at what makes this scheme unique.
Understanding Multi Asset Allocation Funds
A multi asset allocation fund is a type of hybrid mutual fund that invests in at least three different asset classes, with a minimum allocation of 10% to each. These could include equity, debt, gold, silver, real estate investment trusts and more. This diversification can help balance risk and reward potential and provide a more stable investment journey. This is because different asset classes typically respond differently to market fluctuations. As a result, each may offer unique opportunities for potential growth or risk mitigation in different conditions.
In the case of the Bajaj Finserv Multi Asset Allocation Fund, the portfolio is spread across equity (which comprises 35% to 80% of the portfolio), debt securities (10% to 55%), and commodities (10% to 55%). Additionally, the fund may invest in units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
Dividend-yield investing: A key strategy
Bajaj Finserv Multi Asset Allocation Fund is India’s first multi asset allocation fund to follow a high-dividend-yield investing strategy for its equity portion.
Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is calculated by dividing the annual dividend per share by the current stock price.
The Bajaj Finserv Multi Asset Allocation Fund will identify and invest in companies with a higher dividend yield than the Nifty 50 index. These dividends, when reinvested, will purchase more mutual fund units. This, in turn, will result in more opportunities for compounding.
Compounding is the process where the returns on an investment, when reinvested into the mutual fund scheme or security, go on to earn additional returns. This effect can cause wealth to grow exponentially over time. When dividends are added to this, the scope for compounding is further enhanced.
Moreover, companies paying consistent and higher dividends typically have stable business models and a track record of sustainable growth. Therefore, investing in high dividend yielding companies can also potentially reduce portfolio volatility and mitigate risk.
Dynamic duration management in debt
The focus of the debt portion of the portfolio will be on providing relative stability to the fund, especially in volatile markets. Fund managers will also employ a dynamic duration management strategy. This involves adjusting the portfolio’s duration in response to changing interest rate environments and market conditions. By doing so, the fund aims to mitigate interest rate risk and leverage different interest rate scenarios. Macro-economic trends and quantitative inputs will also play a crucial role in guiding asset allocation decisions.
The third asset class, commodities, will include gold ETFs, silver ETFs, and exchange-traded commodities derivatives (ETCD). These investments seek to capitalise on the growth potential of commodities and can also act as a hedge against the equity market’s volatility.
Multi asset allocation funds follow a dynamic management approach, meaning that fund managers have the flexibility to alter the allocation between equity, debt, and commodities to optimise growth and/or mitigate risk, based on market performance, economic trends, and their insights. However, under normal circumstances, the fund will maintain an equity-heavy portfolio.
Investors seeking an innovative and diversified investment avenue that seeks to optimise growth potential while mitigating risk may consider investing in the Bajaj Finserv Multi Asset Allocation Fund via lumpsum or SIP. Units can be purchased at the fact value of Rs. 10 during the NFO period and at the Net Asset Value at the time of redemption when the fund reopens for subscription. It is recommended to consult a financial advisor before taking major investment decisions.
NFO details: Bajaj Finserv Multi Asset Allocation Fund
NFO period: May 13, 2024 – May 27, 2024
Type of scheme: An open ended scheme investing in equity and equity related instruments, debt & debt derivatives and money market instruments, Gold ETFs, Silver ETFs, exchange traded commodity derivatives and in units of REITs and InvITs.
Minimum application amount:
During NFO
Minimum application amount (lumpsum) – Rs. 500 and in multiples of Re. 1.
Systematic Investment Plan (SIP):
Rs. 500 and above: minimum 6 instalments.
During ongoing offer:
Fresh subscription – Rs. 500/- and in multiples of Re. 1/-
Minimum additional application amount – Rs. 100/- and in multiples of Re. 1/-
Systematic Investment Plan (SIP):
Rs. 500 and above: minimum 6 instalments.
Minimum amount for switch-in – Rs. 500 and in multiples of Re. 1.
Plan
Bajaj Finserv Multi Asset Allocation Fund – Direct Plan
Bajaj Finserv Multi Asset Allocation Fund – Regular Plan
Bajaj Finserv Multi Asset Allocation Fund
An open ended scheme investing in equity and equity related instruments, debt & debt derivatives and money market instruments, Gold ETFs, Silver ETFs, exchange traded commodity derivatives and in units of REITs and InvITs.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Ahmedabad Plane Crash